Clever Chase Business Loan Promo
There are some pretty creative folks out there, even in banking. Every once in a while someone will suggest a reward to residential borrowers for making their payment, instead of (what some would say) a reward for not making their payments. In some news out yesterday, Chase announced an incentive that rewards small businesses for each new employee they hire this year. The bank will lower its interest rate on a new Chase Business Line of Credit by 0.5 percentage point for each new hire, up to three, for the life of the loan. It is not a huge amount, but nonetheless helps.
Jan-June Mortgage Securities Volume Of $217.6b Double 2009
We’re halfway done with 2010, and companies are wondering if the dire volume and profit predictions that started off 2010 are going to come true or not. I will opine here and say that given that mortgage employment is thought to be down about 50% from 2008, anyone still in the business should pat themselves on the shoulder. And any company making money and expanding should do the same. U.S. mortgage-backed securities issuance jumped in the first six months of 2010 from the same period a year earlier. Thomson Reuters said U.S. mortgage-backed securities issuance totaled $217.6 billion in the first half of 2010, nearly double the $112.5 billion total in the same period a year earlier. Bank of America was the top underwriter with a 26% market share. Barclays was #2 with about an 11% share, and Goldman Sachs was #3 with a 9.5% share. The survey does not monitor loan production, nor IO or principal-only securities, but instead looks at mortgage bonds backed by whole commercial and residential real estate loans as well as the mortgage-backed securities initially packaged by Fannie Mae, Freddie Mac and Ginnie Mae.
Mortgage Company Profit Stats
A rising tide raises all boats…According to the Mortgage Bankers Association, independent mortgage bankers and subsidiaries made an average profit of $1,135 on each loan they originated in 2009, compared to $305 per loan in 2008. Total loan production expenses dropped to $3,685 per loan from $4,717 per loan in 2008, and per loan income also dropped to $4,820 from $5,023 per loan in 2008. Sixty one (61) basis points is nothing to sneeze out, and certainly beat the 15 basis points from 2008. Per the MBA, the profit for mortgage subsidiaries for bank and thrifts averaged 79.5 basis points per loan, but only 54.9 basis points for independent mortgage companies. Go to MBAA’s site for more stats.
President Should Sign Tax Credit Deadline Extension
We’ve passed the June 30 deadline for extending the tax credit deadline, but finally the U.S. Congress approved a bill extending the closing deadline for homebuyers trying to take advantage of tax credits ($8k for first timers and $6,500 for primary residences). Homebuyers with contracts signed by April 30 who failed to go to closing by the June 30 deadline will now have until September 30 to complete their purchases, assuming that the President signs it.
Financial Reform Passes House
The Financial Reform Bill passed the House, but will not be voted on by the Senate until mid-July. Afterward, one can expect that brokers and agents of mortgage banks won’t be compensated based on any of the terms or conditions of a loan. Originators can be paid only by base salary or by percentage of the loan amount, or from a bonus if the employer chooses. Origination fees may be capped at 3%, and consumers will now decide to pay those fees all up front or have them built into the interest rate. Before, borrowers sometimes had to pay both upfront and the fees embedded into the interest rate. The president of the National Association of Mortgage Brokers said, “We are trying to get language added to that portion so that the consumer has a choice to make a combination of the two,”
Foreclosures Account for 31% of Sales
RealtyTrac told us that foreclosure sales currently account for 31% of all residential sales and have calculated that these homes sell at a 27% discount to the current market. (Uh, but doesn’t the “current market” include these?) Over a quarter million homes sold in the first quarter had a default or auction notice or were seized by banks. Fortunately this number is down slightly from the last quarter of 2009.
Can Rates Possibly Get Lower?
Generally, rates improved Tuesday, and they improved again yesterday with the 10-yr firmly below 3% in yield. But although many fixed-income rates declined, MBS’s and mortgage rates did very little and in fact worsened in some areas, leading to the inevitable questions to rate sheet creators, “Hey, if rates are dropping, how come your prices are hardly budging?” Investors once again fear “negative convexity” in mortgages, whereby if rates drop prepayment fears creep into the market and mortgage prices don’t really tag along with the rally. And at this point, if rates keep dropping, we will find 30-yr mortgages in the low 4% range, and everyone with a mortgage rate higher than 4.75% will be the target for a refinance. I’d tell loan officers to “dust off the rolodex” but it hasn’t even gotten dusty from the last batch of refinancing! That will be an interesting dynamic if much of the $1.25 trillion that the Fed purchased of MBS’s begins to refinance.
Economic News Roundup
Today we have a pretty full calendar. We’ve already had Initial Jobless Claims, later we’ll have Construction Spending for May, the ISM Index, and Pending Home Sales. Tomorrow’s Unemployment Rate is expected to be unchanged at 9.7%. But the Non-farm Payroll number is expected to drop by more than 100,000 jobs in June, driven primarily by lost temporary Census worker positions. Many analysts are hoping for private payrolls to go up; however, even if yesterday’s ADP number was pretty weak. Jobless Claims shot up to 472,000, pushing stocks down even more but rates lower – the 10-yr is down to 2.91% and mortgages are better by ,125-,250,
She was standing in the kitchen, preparing our usual soft-boiled eggs and toast for breakfast, wearing only the ‘T’ shirt that she normally slept in.
As I walked in, almost awake, she turned to me and said softly, “You’ve got to make love to me this very moment!”
My eyes lit up and I thought, “I am either still dreaming or this is going to be my lucky day!”
Not wanting to lose the moment, I embraced her and then gave it my all; right there on the kitchen table.
Afterward she said, “Thanks,” and returned to the stove, her T-shirt still around her neck.
Happy, but a little puzzled, I asked, “What was that all about?”
She explained, “The egg timer’s broken.”